This is an entirely free service. No payments are to be made. Also send me The Ultimate Guide to Profiting From Derivatives and sign me up for Profit Hunter,a free newsletter that focuses on identifying short term money making opportunities.Download NowSubscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.

Total developable area stands at 423 m square feet (msqft) at the end of 1QFY10, as compared to 425 msqft at the end of 4QFY09.

Consolidated financial snapshot

(Rs m)

1QFY09

1QFY10

Change

Sales

38,106

16,499

-56.7%

Expenditure

14,662

9,057

-38.2%

Operating profit (EBDITA)

23,445

7,441

-68.3%

Operating profit margin (%)

61.5%

45.1%

Other income

357

961

169.0%

Interest

541

2,874

430.9%

Depreciation

546

734

34.5%

Profit before tax

22,715

4,794

-78.9%

Tax

3,766

993

-73.6%

Minority interest

(107)

165

Share in profit/(loss) of associates

(201)

(6)

Profit after tax/(loss)

18,640

3,960

-78.8%

Net profit margin (%)

48.9%

24.0%

No. of shares (m)

1,697.2

Diluted earnings per share (Rs) *

17.7

P/E ratio (x) *

22.5

* On a trailing 12-months basis

What has driven performance in 1QFY10?

DLF’s revenues declined by 57% YoY during 1QFY10. While on a year on year basis, revenues have slumped sharply, on a sequential basis revenues are higher by 47% QoQ. According to the management, the business scenario has improved after the sluggish demand in the past few quarters. Revenue growth during 1QFY10 was largely led by sales within the residential segment. During the quarter, the company launched a project called ‘Capital Greens’. As per the company, phase-I (2 m sqft) of the project was sold out on the first day itself. In addition, it also sold 0.5 m sqft in Bangalore during the quarter. In the commercial segment, DLF handed over approx 1 m sqft of office (Gurgaon) and commercial complex space (Delhi).

During the quarter, the company reorganised its business into two segments -development (sales and commercial complexes) and annuity (offices and retail malls). Earlier, all these segments were looked at separately. Within its development business, the company saw a rate increase of nearly 91% YoY in its residential space and a 50% YoY increase in rates of commercial complexes. Margins in its residential business increased to nearly 54% from 40% in the quarter ending June 2008. However margins in its commercial complex business declined to 59% from 71% last year. As for its annuity business, lease rates in the office segment dropped by nearly 57% on a year on year basis.

DLF’s operating profits declined by 68% YoY on the back of a strong contraction in operating margins. During 1QFY10, operating margins stood at 45.1% as compared to 61.5% in the corresponding quarter last year. As for the performance at the bottomline level, DLF’s profits declined by 79% YoY during the quarter. The fall in profits is higher than the decline in operating profits largely on account of higher interest costs, which shot up by 431% YoY. As a percentage of sales, interest costs increased to 17% of sales as compared to about 1% in 1QFY09.

What to expect?

At the current price of Rs 400, the stock is trading at a multiple of 22.5 times its trailing 12-month earnings. As DLF’s management had mentioned in the previous quarter, the company needed to clean up its balance sheet. With the business environment still being muted, the company had decided to sell its non-core businesses and use the money to lower its debt burden. As a result, the company’s debt to equity ratio has reduced to around 0.5, down from 0.6 at the end of FY09. The company plans to further reduce it to 0.3 by the end of the fiscal.

The company also received nearly Rs 25 bn from DAL during the quarter, as against the target of Rs 20 bn that was set earlier. As for strategies for the external environment, the company plans to continue testing markets for mid-income housing across new locations. On an overall basis, the company plans to launch 16 m sqft during the current fiscal with 8 m sqft each in the mid-income and luxury housing segments. As for the commercial segment, the company plans to be selective in launching new complexes.

OTHER USEFUL LINKS

MARKET STATS

ABOUT EQUITYMASTER

Since 1996, Equitymaster has been the source for honest and credible opinions on investing in India. With solid research and in-depth analysis Equitymaster is dedicated towards making its readers- smarter, more confident and richer every day. Here's why hundreds of thousands of readers spread across more than 70 countries Trust Equitymaster.

All rights reserved. Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.